As a third-year resident at a family medicine residency in Stamford, Conn., Jennifer Parsons never had any doubts she would work as a salaried physician.

Parsons, a 2010 graduate of the Stamford Hospital/Columbia University Family Medicine Residency Program, found the prospect of working as a non-salaried physician in a solo or small group practice "financially daunting." And she was convinced that a salaried position would provide more security and freedom, allowing her to receive a steady paycheck without having to worry about the financial side of medicine. Parsons also felt she could change jobs or even relocate much easier by taking a salaried position.

"I interviewed at a couple of private practices," she said. "They were very straight up with me. They told me they wanted me to sign a contract with them and be a part of their practice for many years to come. I didn't feel I could make that kind of commitment right now. I also knew that I might not be staying long enough for a private practice to recoup their initial investment in hiring me in the first place."

So, after completing residency, Parsons went to work for five months as a salaried physician for a clinic operated by her residency program. She then took a job as a salaried family physician with Fairfield County Primary Care in Stamford, a practice that is part of a network of 15 primary care practices owned by Stamford Hospital. She has been with that practice for nearly a year.

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Third-year medical residents are increasingly forgoing small and solo physician practices to work as salaried employees for hospitals and other organizations, according to a recently released Merritt Hawkins survey.

Nearly 60 percent of AAFP members now work as salaried physicians, a percentage that has increased in recent years.

Nearly one-half of the residents in the Merritt Hawkins survey said they are unprepared to handle the business side of medicine.

According to a recent survey overview(www.merritthawkins.com) from health care staffing and consulting firm Merritt Hawkins, Parsons is part of a growing national trend as third-year medical residents increasingly forgo small and solo physician practices to work as salaried employees for hospitals, hospital-owned practices, health systems, medical groups and other health care organizations.

"The great majority of final-year residents surveyed, 94 percent, would prefer a straight salary or a salary with production bonus in their first year of practice," the survey said. "Only 2 percent would prefer an income guarantee, a type of compensation structure usually offered in independent rather than employed practice settings. This reinforces the fact that residents today are not particularly entrepreneurial and would rather earn a paycheck initially than assume the financial risk of practice ownership."

This emerging trend is playing out across all physician specialties and subspecialties, said Kurt Mosley, vice president of strategic alliances for Merritt Hawkins. And the AAFP has found that to be true. In fact, according to AAFP membership figures, the majority of AAFP members, 59 percent, now work as salaried physicians, and that percentage is growing.

Survey Gauges Level of 'Buyer's Remorse,' Other Resident Concerns

A recent Merritt Hawkins survey of final-year medical residents asked them if they would study medicine again if they had their education to do over or if they would select some other field. The vast majority, 71 percent, said they would chose medicine, but a significant minority, 29 percent, said they would choose another field, an increase of 11 percent from a similar 2008 survey.

"The fact that nearly one in three newly trained physicians expressed 'buyer's remorse' over their choice of a career is in part a reflection of the current turbulent state of the medical profession," said the survey. This year's class of physicians "will be entering practice at a unique time of change and uncertainty caused by health reform and a variety of other factors."

"Rather than being eager to begin their medical careers, many residents today may be troubled by the length, expense and intensity of their training and by the conditions that may greet them in their first professional practice," said the survey.

Kurt Mosley, vice president of strategic alliances for Merritt Hawkins, attributes much of the buyer's remorse to lack of education in residencies about how to evaluate a practice and how to ultimately choose a practice that best fits the skills of the new physician.

"There needs to be more education so we don't have this remorse," said Mosley. "I think a lot of this remorse is not true remorse. It is just a lack of information."

The survey also found that

residents identified "availability of free time" as their greatest concern as they consider entering their first medical practice;

52 percent of residents surveyed said they owe at least $100,000 in student loans, 41 percent said they owe at least $150,000 and 19 percent said they owe $200,000 or more;

the majority of residents, 94 percent, would prefer to practice in communities of 50,000 people or more -- only 6 percent would prefer to practice in communities of 50,000 or less; and

the majority of residents, 72 percent, expect to make $176,000 a year or more in their first practice.

Prevailing Trends

According to the Merritt Hawkins survey, physicians are facing extraordinary challenges and changes. "Health reform, considered as both the provisions of the Patient Protection and Affordable Care Act and prevailing market forces, is reshaping the traditional paradigm of physician practice, away from the independent practice model and toward employment of physicians by hospitals, health systems, medical groups and other organizations," said the survey. "A great deal of uncertainty still exists regarding how health care will be delivered post reform -- whether it will be through emerging models, such as accountable care organizations, medical homes and concierge practices, through traditional models or models yet to emerge.

"This uncertainty is heightened by recent and looming cuts to physician reimbursement that may take place through adjustments to the sustainable growth rate, through the debt ceiling agreement and through new payment formulas."

It is not surprising then, that 32 percent of the survey's respondents said they want to work for a hospital, an increase of 10 percent from the previous 2008 survey, said Mosley.

"Given recent declines in reimbursement escalating practice costs and a high level of administrative responsibilities, many in-practice physicians are migrating away from independent practice and toward hospital employment," said Merritt Hawkins. "Fifty-six percent of the physician search assignments Merritt Hawkins conducted in 2010-2011 featured hospital employment of the physician, up from just 11 percent in 2004."

Much of that may be due to the cost of establishing a small practice. Information from a proprietorial AAFP survey found that employed FPs are 12 percent more likely to have electronic health records in their practices than are FPs that own their practices. In addition, the survey found that employed physicians are 19 percent more likely than physician practice owners to have plans to remain in their current practice setting for the foreseeable future.

However, there still is a percentage of residents who want the independence of their own practice. The Merritt Hawkins study found that 28 percent of third-year residents wanted to practice as part of a physician partnership, which was a 4 percent increase from the 2008 survey and the biggest surprise of the 2011 survey, according to Mosley.

"I think there are still some entrepreneurial doctors out there," he said. "We still have some residents who are saying, 'I want to give it a go in a partnership, and I want to be independent.' That surprised me, especially at a time when it is so hard to start a practice."

"Medicine has become so much of a business, and a lot of docs want to practice medicine," said former AAFP President Lori Heim, M.D., of Vass, N.C., a hospitalist who works for Scotland Memorial Hospital in Laurinburg, N.C. "They don't want to run their own payrolls, and they don't want to worry about having to take out loans -- sometimes very significant loans -- to start a new business."

"We are seeing more and more doctors seeking the hospital out," said Mosley. "In the mid-1990s, it was the hospitals going after primary care doctors, but now it is the doctors seeking out the hospitals and going to them. Instead of the boys asking the girls to dance, it is the girls asking the boys to dance."

This trend is driven by several factors. Physicians often perceive hospital employment as a more stable and secure environment than private practice, Mosley said. For example, with their resources and market clout, hospitals are able to negotiate contracts on behalf of physicians, shielding from them the business side of medicine and other administrative tasks that can take time away from patient care.

"There are a lot of uncertainties about private practice," said Heim. "Family physicians in small groups are at a disadvantage when negotiating contracts, and unfortunately, many family physicians don't really have training in how to run a business."

Nearly one-half of the residents, 48 percent, in the Merritt Hawkins survey said they are unprepared to handle the business side of medicine; only 9 percent said they are "very prepared to handle the business side of medicine." Fifty-six percent, meanwhile, said they received no formal instruction during their medical school training on how to negotiate contracts, compensation arrangements and payment methods.

Deciding Factors

In the survey, residents cited geographic location, personal time and lifestyle as the most important factors in evaluating a medical practice opportunity. As a hospitalist, Heim has the flexibility in her schedule to travel as she needs to, one of the main reasons she took a job with Scotland Memorial Hospital three years ago.

"Flexibility is a common reason for wanting to be a hospitalist," said Heim.

Not surprisingly, other factors play a role in choosing where to work. In the survey, 41 percent of respondents said payment of educational loans has some effect on whether they would accept a practice position.

James Colvard, D.O., a third-year medical resident at the Montgomery Family Medicine Residency in Montgomery, Ala., owes more than $200,000 in student loans from medical school. As he begins his job search, Colvard said loan repayment will have a "huge role" in determining what jobs he considers and ultimately accepts.

"If a hospital or practice group offers loan repayment, I would definitely be more apt to look at that (job offer) in more detail," said Colvard.

Tom Kincer, M.D., is the program director of the Montgomery Family Medicine Residency. He said he urges residents like Colvard to practice in community-based settings instead of hospitals. Kincer is convinced that the trend toward hospital employment among family physicians and other physicians poses a direct threat to patient care.

"The number of physicians in office-based practices is decreasing, and it is harder for the general population to find doctors to take care of their problems," he said.

Most family physicians went into the practice of family medicine to work in community settings, Kincer added.